Hooper v. Barnett Bank of West Florida, AZ-395

• Citation: 474 So.2d 1253,10 Fla. L. Weekly 2078
• Decision Date: 05 September 1985
• Docket Number: No. AZ-395,AZ-395
• Parties: 10 Fla. L. Weekly 2078 W. Richard HOOPER, Appellant, v. BARNETT BANK OF WEST FLORIDA, Appellee.
• Court: Court of Appeal of Florida (US)

Page 1253

474 So.2d 1253

10 Fla. L. Weekly 2078

W. Richard HOOPER, Appellant, v. BARNETT BANK OF WEST FLORIDA, Appellee.

No. AZ-395.

District Court of Appeal of Florida First District.

Sept. 5, 1985.

Rehearing Denied Sept. 27, 1985.

Donald H. Partington and Robert D. Hart, Jr. of Clark, Partington, Hart, Hart & Johnson, Pensacola, for appellant.

Robert P. Gaines of Beggs & Lane, Pensacola, for appellee.

SMITH, Judge.

W. Richard Hooper, a physician, appeals judgments adverse to him in his action against the appellee bank. The trial court directed a verdict in favor of the bank at the close of all the evidence in Hooper's suit seeking cancellation of a promissory note to the bank in the sum of $90,000.00, and also entered a final judgment in favor of the bank on its counterclaim against Hooper for collection of the $90,000.00 note, plus interest, attorneys fees and costs. The loan by the bank to Hooper had been arranged by Joe G. Hosner, an attorney and customer of the bank. Dr. Hooper's suit was based on allegations that the bank had knowledge of fraudulent activity by Hosner, but failed to disclose this information to Dr. Hooper, and instead, made the loan knowing that a fraud was being perpetrated on Dr. Hooper. We reverse.

In reviewing the directed verdict, we are required to view the evidence in a light most favorable to Dr. Hooper. So viewed, the evidence shows the following: When Dr. Hooper moved to Pensacola in 1973 he began doing business with the bank. He appointed the bank trustee of a trust and personal representative of his estate. Several years later, Dr. Hooper became interested in making a tax shelter investment. In June 1981, he met with Hosner to discuss tax shelter investments. Hosner took him to see Edwin Riffel, the loan officer in charge of Hosner's accounts at the bank. Dr. Hooper testified that Riffel told him he was familiar with Hosner investments, and they were sound and had passed IRS scrutiny. Dr. Hooper decided to make a tax shelter investment with Hosner and borrowed $50,000.00 from the bank for the investment.

During the spring of 1982, Harry Stump, the assistant vice president at the bank who supervised the bookkeeping department, the proof department and the cash management department, became concerned at the rather large amount of uncollected funds in the Hosner Enterprises account. He also became suspicious that Hosner was involved in a check-kiting scheme. When the uncollected funds reached approximately $200,000.00 in the Hosner Enterprises account in early May, Stump met with Riffel on May 11 and conveyed his suspicions to Riffel. Riffel was aware of the large amount of uncollected funds in the Hosner Enterprises account and was additionally concerned because Hosner was delinquent in his loan payments. In fact, early in May, Riffel had told Hosner he had to get some money into his account. Also, by May 1982, Riffel knew that the IRS was investigating Hosner. ¹

In his deposition prior to trial, Stump had testified that he became personally convinced that Hosner was check-kiting around May 10, 1982. However, at the trial, he explained that his deposition testimony had been too hasty and that a more accurate description of his feelings on May 11 was that he was concerned about a check-kiting scheme, but the scheme was not confirmed because "you can't confirm that it is a kite until you start to put a stop to it."

On May 11, Stump instructed bank employees to make copies of the checks which were being deposited to the Hosner account and send the copies to him, and only then could the deposits be credited to Hosner's account. After this particular reporting procedure began, the uncollected funds activity on Hosner's account increased.

On May 14, Stump admitted, the situation had deteriorated to the point that Stump felt the bank was "at risk." In other words, the uncollected funds in the Hosner account were very great, so that if the bank continued to pay the checks presented on the account, it might be paying out money which was not in the bank, and which could not be collected, and the bank would lose money. In an effort to protect the bank, Stump made the decision to return all Hosner checks presented to the bank on May 13 on the grounds that they were being drawn against uncollected funds. A computer printout of bank transactions, which is reviewed daily by bank officers, was prepared on the evening of Friday, May 14. However, this printout would not ordinarily be reviewed by other bank officials until the next business day, which was Monday, May 17. Stump testified that May 17 was the first time other bank officials would have known that Hosner's checks were being returned on the basis of uncollected funds. Stump testified that after May 11 he did not discuss the Hosner situation with Riffel again until May 19 or 20.

The transaction giving rise to this litigation occurred as follows: Late in the afternoon of May 14, during a break from surgery, Dr. Hooper received a call from Hosner. He returned the call. ² Hosner put Dr. Hooper on hold and then came back on the line with Riffel in a three-way conversation. Dr. Hooper asked to borrow $90,000.00 for purposes of investment. Riffel agreed to the loan. The conversation was very short and was ended when Dr. Hooper had to return to surgery. Late that evening, after banking hours, a promissory note prepared by Riffel and a check, representing the proceeds of the loan in the sum of $89,865.00, were delivered to Dr. Hooper for his signature by a messenger from Hosner's office. He signed the note and endorsed the check and these were returned to the messenger. A copy of this check for $89,865.00, introduced into evidence at the trial, shows that the back of the check is stamped "for deposit only, Hosner Enterprises, Inc., 1170027502." Also introduced into evidence was a deposit slip dated May 17, depositing into the Hosner account a sum of money which included a check for $89,865.00.

Meanwhile, at about this same time, another bank in town, First American Bank, began refusing to pay Hosner's checks. On May 17, checks totaling $270,000.00 were returned to the appellee bank from First American Bank. On May 24, the Hosner Enterprises account had insufficient funds and the appellee bank had confirmed a check-kiting scheme. Nevertheless, by May 26, the account had been "zeroed out." At the conclusion of his testimony, Stump admitted that without deposit of Dr. Hooper's approximately $90,000.00 check, Hosner's account would have been overdrawn "$87,000.00 or something."

Dr. Hooper testified he never received any benefit from the $90,000.00 he gave to Hosner. Moreover, he testified that had he known of the IRS investigation, of the check-kiting scheme, of the fact that Barnett had refused to honor checks on the Hosner Enterprises' account to protect its position, that Hosner was at the bank because he was told he needed to get money to the bank to cover overdrafts and delinquent loans, he would not have made the loan. Riffel testified, as justification for his actions, that he did not disclose any information to Dr. Hooper concerning Hosner's account on May 14 because of the duty of confidentiality the bank owed to its depositor, Hosner.

At the conclusion of the plaintiff's evidence, the trial court reserved ruling on the bank's motion for directed verdict. However, the bank then announced that it would present no evidence, and renewed its motion, whereupon the trial court entered a directed verdict in favor of the bank.

Briefly, it is Dr. Hooper's contention that a confidential or fiduciary relationship existed between himself and the bank so as to impose upon the bank the duty to disclose the material facts relating to the loan transaction. First National Bank in Lenox v. Brown, 181 N.W.2d 178 (Iowa 1970). Alternatively, he contends that since the bank had actual knowledge of the fraud perpetrated on him by Hosner that it had an affirmative duty to disclose this knowledge before it made the $90,000.00 loan which furthered the fraud. Richfield Bank and Trust Co. v. Sjogren, 309 Minn. 362, 244 N.W.2d 648 (1976). On the other hand, the bank contends that in the absence of evidence that the bank knew Hosner was going to deposit the loan proceeds in one of the bank's accounts to cover his cash shortages at the bank or that the bank knew Hosner was irretrievably insolvent, the court correctly directed a verdict in favor of the bank. In that vein, the bank argues that Dr. Hooper's evidence did not establish facts sufficient to overcome the bank's obligation not to reveal confidential financial information about its depositor Hosner, Milohnich v. First National Bank of Miami Springs, 224 So.2d 759 (Fla. 3d DCA 1969), particularly in view of the fact that Dr. Hooper failed to request any information about Hosner's current financial affairs from Riffel.

We begin our resolution of this somewhat novel controversy by a review of relevant legal principles, noting, however, that we find little guidance in the Florida case law. Generally, a bank-depositor relationship is treated as a debtor-creditor relationship, and does not ordinarily impose a duty of disclosure upon the bank. Denison State Bank v. Madeira, 230 Kan. 684, 640 P.2d 1235 (1982); Klein v. First Edina National Bank, 293 Minn. 418, 196 N.W.2d 619 (1972); Annot., Existence of Fiduciary Relationship between Bank and Depositor or Customer so as to Impose Special Duty of Disclosure upon Bank, 70 A.L.R.3d 1344, 1347 (1976). However, there are circumstances in which a duty to disclose may arise: (1) one who speaks must say enough to prevent his words from misleading the other party; (2) one who has knowledge of material facts to which the other party does not have access may have a duty to disclose these facts to the other party; and (3) one who stands in a confidential or fiduciary relation to the other party to a transaction must disclose material facts. Klein v. First...